Overview
Liabilities are financial obligations that a person or organization owes to another party.
In ORCA, we help you manage and track liabilities such as:
- Loans
- Mortgages
- Commitments
Interest Rates - (optional field)
- Capture interest rate details for liabilities, including percentage, frequency, and type (fixed or variable).
- ORCA automatically calculates interest outstanding and accrued interest.
- Displayed in the Details View and Structure Lines.
- To enable calculation, add a date to the interest rate event.
This guide will walk you through the process of creating new liabilities, modifying the data of existing liabilities, and finding an overview of all outstanding liabilities in ORCA.
How to create a Liability with Interest rates
- Use the sentence builder to create a new event.
- Start from the perspective of the “loan provider”.
- Use the verb 'lent'.
- Input the ‘Counterparty’.
- Provide the date of when the loan was lent.
- Blend in the Liability after creating the new event. The Liability filter is found at the top of the structure chart.
- Click on the Liability line to see the details of the Loan.
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2Fdbbd92fe-5e74-420c-8345-aeb978ffc27d%2FLent_to_fast_systems.gif?table=block&id=bbe57c98-045e-459d-94da-c360146ad18c&cache=v2)
Editing the Loan details
Click into the Loan and click Edit - (Video at the end of this section showing all the inputs)
Input the date the loan was lent, the date the loan was issued, and the maturity date
- Issue Date: This is when the loan or investment begins.
- Maturity Date: The due date for the final payment, marking the end of the loan or investment period. For example, if you take out a personal loan with a 36-month term, your maturity date would be 36 months from the day you received the loan
- If you took out a personal loan with a 36-month term on January 1, 2024, your maturity date would be January 1, 2027. That’s when the loan should be fully paid off.
Input the Interest type - Fixed or Variable - (optional)
To enable calculation, add a date to the interest rate event. (example in screenshots below with the date January 1, 2024)
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2F718ee63d-5510-4c75-a10f-83fd887e2422%2Fyearly_freq_interest_fixed.gif?table=block&id=5aac81da-5b8b-4d4b-95d8-b930013f5a5c&cache=v2)
Example for Fixed rate:
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2F90496abb-6ee0-4dcb-bf81-f5ff2236c203%2FUntitled.png?table=block&id=fa98a724-5307-4f45-a490-82cef926f9b6&cache=v2)
Example for Variable rate:
For a 5% variable interest rate, the 4% would be the benchmark rate, and the additional 1% would be the spread. Together, they make up the total interest rate of 5%.
Example Variable rate Scenario with yearly frequency
- Principal: $100,000
- Benchmark Rate (e.g., LIBOR): 3%
- Spread: 2%
- Total Interest Rate: 3% (LIBOR) + 2% (Spread) = 5%
Calculation for One Year
- Yearly Interest Rate: 5% annually
- Interest for the Year: $100,000 × 5% = $5,000
So, for a principal of $100,000 with a variable interest rate of 5% (3% LIBOR + 2% spread), the interest for one year would be $5,000.
If the benchmark rate changes, the total interest rate and the yearly interest amount will adjust accordingly. For example, if the LIBOR increases to 4%, the new total interest rate would be 6% (4% LIBOR + 2% spread), and the yearly interest would be:
- New Yearly Interest Rate: 6% annually
- New Interest for the Year: $100,000 × 6% = $6,000
5% Variable
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2F951876f9-4b6d-4eb6-9952-b6ffe65bb3db%2FUntitled.png?table=block&id=cf33db1b-9363-43d6-89e7-327e912b4ca0&cache=v2)
6% Variable
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2F24f70b87-a421-4ed3-9a08-408ba2ee2bc2%2FUntitled.png?table=block&id=6b4c69ae-a67d-4e20-8259-114b80bffa04&cache=v2)
Input the Rate in Percentage % - (optional)
Input the Frequency of: (optional)
- Monthly
- Quarterly
- Yearly
Calculating the Interest Outstanding and Accrued Interest
After inputting the details of the Loan in the previous steps, the Interest Outstanding and Accrued Interest is calculated.
To enable calculation, add a date to the interest rate event.
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2F1a69e714-f837-485f-84cc-d84868400849%2FUntitled.png?table=block&id=e99df5c0-6470-4e1c-8f5f-3bda16999a43&cache=v2)
Understand how Accrued Interest and Interest Outstanding are calculated
*Note* A tooltip is displayed on hover to explain the Accrued Interest Calculation (Screenshot)
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2F743f08c2-b2a7-47ff-8c3f-bb25096e53bb%2Finterest_rate_tooltip.gif?table=block&id=0912023b-c993-4507-ba4c-a114873b8853&cache=v2)
Accrued Interest is calculated based on the period and the number of days within that period.
- [OUTSTANDING PRINCIPAL] x [INTEREST RATE] X [ CURRENT DATE - BEGINNING OF PERIOD] / [PERIOD] - [INTEREST RATE PAID IN THAT PERIOD].
- Where PERIOD
- monthly = number of days of current month
- quarterly = number of days of current quarter
- yearly = number of days of current year
Interest Outstanding is the difference between the expected interest amount paid and the actual interest amount paid.
- EXPECTED INTEREST AMOUNT PAID - INTEREST AMOUNT PAID, where
- EXPECTED INTEREST AMOUNT PAID = SUM of [OUTSTANDING PRINCIPAL] x [INTEREST RATE] per period until last full period
- INTEREST AMOUNT PAID = SUM of amounts for interest payment
Example: If we use the Time Travel feature to set a future date, such as January 1, 2025, you will notice the Interest Outstanding and Accrued Interest recalculated. (Screenshot below)
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2Fcb2c5dbb-dedd-4833-9331-50bf6c6e2dbc%2Ftime_travel_loan.gif?table=block&id=ac638708-9812-407d-8729-bc4c788bc08d&cache=v2)
How to use the sentence builder to pay the Loan
In the Loan details, press the ‘add’ button to bring up the sentence builder and input details of:
- Action of ‘received back’ or ‘paid back’ depending the perspective you are in.
- There is a field for the Interest payment as well.
- Input the date of payment, add notes or attach a relevant document
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2F9958ba3e-05c4-44e5-812d-55fa11cc8ce0%2FLoan_repayment.gif?table=block&id=69186a56-613f-4620-a0d2-c890f71fbaab&cache=v2)
Other Liabilities Guides
Creating a mortgage with collateral
To create a mortgage with collateral, follow these steps:
- Create the mortgage using the legal counterparty of the lender
- Use the verb 'has a mortgage of'
- Create the ‘lender’ as the counterparty
- Use the 'House' as collateral
Once completed, the mortgage will be shown as a line from the lender to the house.
![Notion image](https://www.notion.so/image/https%3A%2F%2Fs3-us-west-2.amazonaws.com%2Fsecure.notion-static.com%2F08eb9559-4b79-481f-9359-0a090a50abf8%2Fapp-withorca_2023-7-14_(4).gif?table=block&id=da63bd90-a001-42d1-a7b5-9a71c81e0dbf&cache=v2)
Overview of All Outstanding Liabilities
For a Person or Entity:
- Click on a card that has a liability you are looking for and select 'Liabilities'.
- At the top, you will see all outstanding liabilities for this card.
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2F1c50052d-cb08-4795-914f-9ade081eb94a%2FOverview_of_Liabilities_.gif?table=block&id=5bc56e49-1448-4959-bf2e-7a07c118100f&cache=v2)
How to blend Liabilities into the structure chart
- First, blend in all liabilities.
- Next, click the button located at the bottom right corner.
- Finally, select 'Liabilities' from the options.
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2F314ff370-1793-4f5b-8b11-2f5d446c7f56%2Fliabilities_blend.gif?table=block&id=d8273212-1e86-4612-afd9-703061d732a5&cache=v2)
Did you know
Make sure that you have added all of your must-have files to your liabilities. You can use ORCA's completeness checks to ensure that every event has an attached file.
![Notion image](https://www.notion.so/image/https%3A%2F%2Fprod-files-secure.s3.us-west-2.amazonaws.com%2Faba5529a-e8ff-4d4c-b470-a458e68a7de3%2F3ae046ca-573b-4804-a0bb-c1e6b74a3892%2FUntitled.png?table=block&id=8c7bdd6e-d5bf-48e2-a801-3a9f2b74b17e&cache=v2)